What's A Water Heater Worth?Jim Olsztynski

Inside a training room at the Montgomery, Ala., plant of Rheem Water Heaters are displays of memorabilia from the company's history. One exhibit includes a mannequin of Edwin Ruud, inventor of the water heater, alongside one of his early models from the turn of the 20th century, and an advertisement for that model. The ad shows the price as $100, or $115 west of the Rockies and in Canada.

Amazing, isn't it, that with a little shopping around this is about what some consumers might pay for a basic 30-gal. or even 40-gal. water heater today! With most products, we chuckle seeing the ridiculously low prices they used to sell for in today's dollars. But Ruud's prices from a century ago wouldn't seem out of place in some Home Depot stores in 2003.

Even more remarkable considering that today's units perform so much better. More capacity, shorter recovery time, they use far less energy and are certainly safer than the time bombs of old. A modern water heater selling for even several hundred bucks is about as good a definition of value as you'll find.

Furnishings 'Rip-Offs'

Now go shopping for home furnishings. My wife and I just bought some run-of-the-mill carpeting that's costing us $2,500. We saw easy chairs running into four figures and modest sofas costing more than twice as much. We could buy several water heaters with what they charge for ugly curtains and drapes.

These are uncomplicated products made of humdrum materials with almost no moving parts. Home furnishings do not entail life-threatening hazards that make professional installation advisable. Mostly you just plop them down. Moreover, they wear out faster than most water heaters. Furniture does make life more comfortable, but if people were forced to choose, most would sooner make do with box crates than live without hot water from the tap.

Nobody accuses stores of being corrupt when they charge thousands of dollars for mundane home furnishings. Yet, many of you reading this automatically spew "rip-off" when you hear of a plumbing contractor charging more than $1,000 for a water heater installation with two to three hours of labor included.

Our market economy has a way of skewing perceptions of value. In terms of complexity and service provided, water heaters should cost way more than products made merely to sit on or walk all over. Edwin Ruud's $100 water heater was the equivalent of a few thousand dollars in today's money. It was an expensive bite out of household budgets back then, but they sold like crazy because people placed a high value on obtaining hot water at the turn of a handle.

That value remains. We just don't see it the same way because competition and manufacturing economies have forced water heater prices absurdly low, and we have adopted this absurdity into our economic frame of reference that defines what things are "supposed" to cost.

Prices Going Up

Water heater prices are on their way to becoming a little less absurd. You've probably already noticed significant increases in the past year owing to a surge in steel prices. Expect more big jumps after July 1, when the mandate kicks in for flammable vapor ignition resistance on all new 30- to 50-gal. atmospheric water heaters.

The manufacturers also will pass on stiff increases in the cost of foam insulation due to changes mandated by the Montreal Protocol. Then next Jan. 20, they must comply with new DOE requirements to boost efficiency in gas-fired units by 10 percent and in electric water heaters by 5 percent. These are a lot of big changes to throw at an industry in a short period of time, and the manufacturers are bracing for some sticker shock by trade and consumer customers.

Yet, astute contractors ought to see this more as an opportunity than a problem. More expensive water heaters give you a chance to make more money. It's simple arithmetic. Just keep your normal percentage markups on the higher priced units and it will mean more dollars in your pockets. Don't sacrifice your margins to increases that will impact everyone and over which you have no control.

The message you need to spread to your customers is that even if water heater prices were to double or triple, they would still be one of the biggest bargains around. Tell them what people paid in Edwin Ruud's time and how much that would be worth today. Tell them how priceless is the safety factor when water heaters get supplied and installed by trained and licensed plumbers. Tell them to compare the water heater's price with that of a new sofa. Then ask which they would sooner live without.

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